Nvidia: Intel’s Sandy Bridge Hits GPUs In China, Says Pac Crest

By Tiernan Ray

Shares of Nvidia (NVDA) took a sharp turn down this morning, though they’ve been working their way back up, somewhat, after Pacific Crest chip analyst Michael McConnell wrote in a note to clients that the company’s fiscal Q2 ending in July has gotten off to “slow start” because of weak demand in China for GPUs.

Nvidia shares are now down 33 cents, almost 2%, at $17.24.

“Unit declines in May are reported at -40% to -45% m/m versus expectations for -10% to -15% m/m,” writes McConnell, with the low-end of Nvidia’s GPUs being hurt by Intel’s (INTC) integrated graphics capability accompanying its “Sandy Bridge” microprocessor systems. Channel inventory in China may be four weeks now for Nvidia GPUs, versus an expected two to three weeks.

McConnell estimates that China accounts for 35% of company revenue, and given that desktop GPUs make up 30% of revenue as a category, he warns that every $25 million of lost desktop GPU revenue could cost 2 cents per share in profit.

However, McConnell is not changing his estimates for now. He still thinks the company will see a normal seasonal pattern this quarter, though caution is warranted, he thinks.

McConnell estimates 26 cents on sales of $1.01 billion this quarter, which is in line with the Street.

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